The gap between the soaring pay of CEOs and the average salary of their employees has been a long standing issue in the capitalist world.

Completely aware of this problem, Gravity Payments CEO, Dan Price, decided to do something about it. The solution?

Raising the minimum wage of his employees — even his lowest paid clerk or salesperson — to $70,000 a year!

The Day He Decided to Raise the Minimum Wage

When asked about the inspiration behind his game changing decision, Mr. Price recounted,

“I never thought about the political impacts of my actions. All I cared about is the welfare of 120 employees working under my roof. The idea to almost double the minimum pay of my employees started after a friend shared how hard it is to pay rent and student loans and make ends meet on a $40,000 annual salary. That just eats me inside”

The average minimum salary of Gravity’s employees is $48,000, according to Ryan Pirkle, company spokesman.

Wage Inequality, a Brewing Issue

Whether Mr. Price is a Good Samaritan who wants to change the world or just another CEO seeking some publicity or both, I don’t know. What I know is that Mr. Price’s announcement rekindled an issue that has been brewing for years.

Chief executives earn almost 300 times bigger than their regular employees

The United States has one of the largest pay gap in the world. As Mr. Price puts it, “When compared, the gap between the paycheck of CEOs and the average minimum wage of regular employees is ridiculous and absurd.”

Several studies show that chief executives earn almost 300 times bigger than their regular employees who, most of the time, do much of the legwork.

These estimates are even higher compared to the 20 t0 1 ratio recommended by magnate J. Pierpont Morgan and management expert-visionary Peter Drucker.

Last 2010, the US Congress directed the Securities and Exchange Commission to require all publicly held companies to provide information regarding the ratio of their CEO paychecks to the average pay of regular employees.

A roundtable of corporate executives strongly opposed the idea because they said, “It’s too costly and cumbersome to implement.” And as a result, the mandate was put on hold.

Dan Price announcement to increase the minimum wage of his employees shook the entire planet

Of all issues in the country that he could address as a business leader, Mr. Price decided to tackle on wage inequality.

“I’m nervous,” he admitted. But it’s now too late to pull back. His announcement to increase the minimum wage of his employees shook the entire planet.

And everyone concerned accepted it with mixed emotions and divided opinions.

Divided Opinions

The wage inequality issue is a very sensitive one. And Mr. Price’s actions, as expected, drew the entire world’s attention.

Because of higher minimum pay, Gravity Payments has received thousands of applications. Skeptics branded Mr. Price as a socialist.

Talk show hosts lined up for him. Some praised him. Other ranted on him. Perhaps, the ones that Mr. Price should pay attention are the people who are directly affected by his minimum wage increase. And those are his employees and his clients.

Talk show hosts lined up for him. Some praised him. Other ranted on him.

Hayley Vogt is working as a communications coordinator at Gravity Payments. She earns roughly $45,000 a year.

“Saying I’m happy about the minimum wage increase is an understatement. I am completely blown off! I am still recovering after paying a huge emergency room bill. Before Mr. Price’s announcement, I’ve been worrying about how I’ll cover my rent. Everyone is talking about this $15 per hour minimum salary in Seattle and it’s nice to work someplace where someone is actually doing something about it and not just talking about it.”

“Saying I’m happy about the minimum wage increase is an understatement. I am completely blown off!”

There were also some who were not happy with Mr. Price’s decision. One of them is Grant Morgan, a web developer at Gravity Payments.

“I had a lot of mixed emotions. Now the people who were just clocking in and out were making the same as me. Mr. Price’s decision to increase the minimum salary shackles high performers to less motivated team members.”

“Mr. Price’s decision to increase the minimum salary shackles high performers to less motivated team members”

I was kind of uncomfortable and didn’t like having my wage advertised so publicly and so blatantly. It changed perspectives and expectations of you, whether it’s the amount you tip on a cup of coffee that day or family and friends now calling you for a loan,”

Mr. Morgan added.

On the clients’ side, not all are happy about Mr. Price’s move as well. Some are afraid that they will suffer higher charges or poor customer service as a result.

Despite the sentiments, there are still others who remained loyal to Gravity Payments particularly Mr. Solly Amon of Pure Food Fish.

On the bright side, Gravity Payments also gained new clients especially those who share the same vision as Mr. Price.

A Price to Pay

Only time will tell us whether Mr. Price’s decision is indeed the right move or not. Only one thing is certain: Mr. Price has a price to pay.

To raise the minimum salary of his employees to $70,000, Mr. Price had to cut his salary from nearly $1 million to $70,000 dollars.

Eighty percent of Gravity Payments’ $2.2 million profit last year will also be shoved up to the “cause”.

In an interview, Mr. Price mentioned that he is leasing his house to make ends meet. Oh, did I mention that his brother, Lucas Price (who owns a part of the company), also filed a lawsuit against him?

The Other Side of the Wage Inequality Issue

While many claim that minimum wage earners are treated unfairly. There are also some who trumpets that most of what we know about minimum pay is false.

There are around 3.6 million workers in the US who are earning at or below the minimum wage

According to the Bureau of Labor Statistics, there are around 3.6 million workers in the US who are earning at or below the minimum wage. Thirty-one percent of them are teenagers, 1.1% are over 25 and 55% are 25 years old or younger.

Doing the math, only 0.8 percent of the American workforce aging 25 or above are earning the minimum wage. And the catch?

Sixty-three percent of workers who earn $9.50 per hour are not the primary breadwinners in their household and 43% live in a household that earns more than $50,000 per year.

In short, most minimum pay earners in the US are not uniformly poor and struggling.

Most minimum pay earners in the US are not uniformly poor and struggling

Well, the numbers speak for themselves but sometimes, it takes a different lens to view reality.

What do you think? Are you with Mr. Price? Or are you a part of the other side of the coin?

Lenmark.